Why is there no money at the banks but plenty on the streets?




I could not help overhearing the conversation.

I was in a commuter mini-bus on my way from Killarney in Bulawayo to town to make my weekly withdrawal of $100.  That was before it was reduced to $50.

My bank boasted that it was the most generous as others were now giving their clients less than half this.

“How much are you looking at?” a young man sitting in the seat in front of me said.

He was speaking in Shona, something that should make you uncomfortable especially if you do not know who is sitting beside you.

“Fifty grand!” he said. “Give me five days as I can only raise ten grand a day?”

“My God,” I thought to myself.

Here I was waiting a whole week to get only $100 yet this young man could raise $10 000 a day!

Where was he getting the money?

Obviously he was not doing this for free?

He was in business.

The business of selling cash.

I shuddered because this was what happened in 2007-2008 when some people left their full-time professional jobs to become bosiphateleni- selling money on the streets.

It reminded me of what American comedian Eddie Griffin says in his Voodoo Child video.

”We need the poo-lii-ce!”

But then Zimbabwe police have become so corrupt that they will join forces with the young man instead of arresting him or finding the source of his cash.

I did not pay attention to the young man’s story then but my interest was rekindled by an old friend when he asked me:  “You used to be a good journalist. Why don’t you find out why there is no cash at the banks, but there is plenty of cash on the streets? That is our money.”

Indeed, during my early days I used to be a sleuth and enjoyed challenging investigative stories.

But I was now retired.  All the same this was an interesting story.

I thought to myself I might not be able to investigate, but I can just observe. And this was what I did.

I remember when cash shortages began way back in 2002, the Zimbabwe Congress of Trade Unions said cash shortages were mainly due to lack of confidence in the government and in banks.

This seemed to be what was happening.  Zimbabweans had every reason not to trust banks.

John Chikura of the Depositors Protection Corporation says six banks have closed down and some 54 909 depositors lost their money.

Only 11 620 have been paid the mandatory $500 paid to every depositor, a system that only benefits those with less than that in their bank accounts as they get all their money back.

A colleague said people still have money  but no longer keep it in the bank because they no longer trust banks.

Besides, it is impossible to get your money from the bank.

“We now call it Asian banking, which means keep your money under your pillow.”

Indeed most people are keeping their money at their homes but unfortunately some have become targets of robbers.

In June, The Herald reported that robbers got away with $80 000 stashed in a car.

Criminals broke into a house in Belvedere in Harare last month and got away with $20 000 cash.

A maid recently appeared in court for stealing $3 000 from her boss.

People have money, and there is plenty of it on the streets of Harare, Bulawayo, Gweru and even Johannesburg.

Walking around, you see people with wards of cash, selling it.

A Zimbabwean only identified as Garikai who is a money trader in Johannesburg said he was getting as much as $20 000 in bond notes every month smuggled to him and wished the present cash crisis could continue as he is cashing in on it.

The cash shortages have created cash barons with connections in banks and politics.

The informal sector which now accounts for more 60 percent of Zimbabwe’s economy is also fuelling the cash business because entrepreneurs do not bank their money as they will not be able to get the amount they want when they want it.

During the 2007-2008 crisis for example, then Central Bank governor Gideon Gono said that there was $67 trillion in circulation in Zimbabwe but the Central Bank could only account for $2 trillion.

Current Central Bank governor John Mangudya says he cannot understand why the country has a cash crisis because it should have $1 billion in circulation.

“The current stock of money in circulation in Zimbabwe is made up of bond coins ($25 million), bond notes ($175 million) and multi-currencies dominated by the U.S. dollar at approximately $800 million, to give a total of around $1 billion,” he said in his latest monetary policy statement.

“This quantity of money in the economy is quite sufficient to support the usable bank balances, as measured by the RTGS balances, currently sitting at around $1.6 billion within the banking system.

“The amount of money in circulation is around 62.5% of RTGS balances and/or 15.5% of the total deposits as measured by M2 of around $6.2 billion.

“For all intents and purposes, and in line with international best practice, the money in circulation in the Zimbabwean economy is sufficient to support money supply as measured by M0, M1 or M2.

“What therefore makes the situation in Zimbabwe unique is that money in the economy is not circulating efficiently within the formal economy.

“Its confined to the informal sector and/or the parallel markets.”

Mangudya said cash shortages were caused by rent seeking behaviour, externalisation motives since the US dollar is a highly sought-after currency, corruption and lack of confidence which is induced by indiscipline.

According to Mangudya to solve the cash crisis:

  • The Zimbabwe Revenue Authority should ensure that the exportation of cash, including bond notes, by travellers is within the authorised limits,
  • Banks should ensure that business point of sale (POS) machines are not linked to individuals’ accounts. This malpractice or financial indiscipline is negatively affecting the tax base as business accounts reflect little business while most of the transactions are being reflected in individual accounts.
  • Adherence to the cash-back current policy in place, and
  • Going digital, embracing plastic money, to avoid queuing for cash at banks and in order to preserve foreign exchange for foreign payments.

Things have so far not worked.  No one can do or is willing to do what Mangudya say because some people they are profiting from the chaos.

The question remains, why is there no money at the banks but there is plenty on the streets. Where are those on the streets getting the cash?

There are only be two sources, the central bank itself and the commercial banks.

One financial journalist said some employees of the central bank were the chief culprits.

“During the 2008 cash crisis Gono and his senior staff made money. There were reports that it was the central bank that was fuelling the black market, but they were also getting rich personally,” the journalist said.

“The central bank is back in the game again, this time through the RTGS system. I bet Mangudya is benefitting from this system. It is just too tempting to resist. I know that some of his juniors are, especially those that once worked with Gono.

“They made money in 2008 and bought properties and businesses in the Kopje area. These properties and business had become dilapidated as their fortunes disappeared, but I can see that they are being spruced up now, this means they are making money once again.”

With premiums of up to 30 percent, going to 50 percent if one wants hard currency, this is too good an offer to miss if you have access to cash.

After all, there is nothing to worry about since those who should be policing the system are the once flouting it.

But maybe, maybe someone might see reason because what was happening in 2007 and 2008 is exactly what is happening now in 2017 and could spill into 2018.

Those in power do not want a repeat of 2008 because they lost to the opposition.

While they managed to wriggle their way out, there is no way they will be able to do that in 2018 because Zimbabweans know what happened in 2008.

But then this might just be wishful thinking on my part because political bickering seems to have become a full-time occupation.

Worse still it is not even rival parties fighting each other. The fights are internal.

G40 is battling Lacoste in ZANU-PF.

Khupe is fighting Tsvangirai in the MDC-T.

Biti is in trouble in the PDP for getting into an alliance with Tsvangirai.

Joice Mujuru is losing members in the NPP.

Who then is focusing on what is happening in the country?

The InsiderZim